Grain producers get to vote on referendum

Plainview Herald

Published 6:45 am, Sunday, August 7, 2011

LUBBOCK - Every year Texas grain producers must also entrust their livelihoods with the grain buyers and warehouses they do business with. When grain producers deliver the bounty of their crops to grain elevators, they expect those companies to fulfill their contractual obligation to remit timely payments or adequately maintain the grain in storage.

In light of a number of grain facility closures and financial failures across the state in recent years that resulted in millions of dollars in losses to Texas grain producers who were not compensated for their stored or contracted grain, this is a significant issue.

Thanks to legislation introduced by Rep. Larry Phillips of Sherman and Sen. Craig Estes of Wichita Falls, and signed into law by Gov. Rick Perry, now producers have the opportunity to vote on whether to create and pay for a self-insurance program that will cover their losses when they are not paid for grain they deliver to a buyer or a storage facility.

"Passage of this new law has been a top priority for Texas producers who need this additional risk-management tool to protect themselves from catastrophic losses that could put them out of business," David Gibson, executive vice president of the Corn Producers Association of Texas, said.

The Texas legislation was modeled after successful indemnification programs that have operated for decades in more than a dozen other major grain producing states.

"This will be similar to the checkoff programs that producers are familiar with," Gibson said. "And grain producers will have an opportunity to vote on whether to move forward with funding and operating the program."

If approved by producers in a referendum, an indemnification fund will be created and financed by a small assessment deducted from a producer's proceeds when grain is sold. Grain buyers will withhold the assessments from the sales and remit the assessments to the fund each quarter.

If a grain producer suffers a loss when a grain elevator has a financial failure or a grain buyer fails to pay for delivered grain, the producer can file a claim with the Fund to recover up to 90 percent of the value of the grain lost.

The program will apply to transactions involving corn, soybeans, wheat and grain sorghum.

Next month the Agriculture Commissioner will appoint a nine-member board with representatives from grain producers, storage facilities and grain buyers to conduct the referendum and oversee operations of the indemnification fund.

The board will adopt procedures and set a date for the producer referendum. Producers will have 90-day notice before the referendum is held.

This fund is long-awaited by many Texas grain producers, and it is important for producers to become fully aware of the benefits of establishing it. Further information about the fund is available on the Texas Corn Producers' website, www.TexasCorn.org.